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Tuesday, November 04, 2008

Business Value from SOA - Longtail Optimization

Someone who hides behind the sobriquet "Mr Web Service" has posted an interesting idea: that software-as-a-service permits small firms to optimize fine details of their business operations, where this would previously have required the acquisition and installation of expensive software.[Software as a Service (SaaS) & UK/US Credit Crunch]

The (self-interested) example he posts is route-optimization-as-a-service, which is provided by German firm DNA Evolutions as well as his own company PostcodeAnywhere.

"Who can benefit from this? SMEs in the haulage industry who can’t afford the $90,000+ price-tag on traditional software that does the job. So far they’ve got by without it… all the SMEs have got by without it. This is an extreme example, of course, because route opt can reduce journey times by 30%. A lot of SaaS apps make less obvious savings or increases in efficiency. ... Now we’re facing a recession (sorry … credit crunch…) everybody is going to be forced to tighten their belts. In short, business will have to adopt SaaS in order to remain competitive."

This argument is making a fundamental point about the economics of scale. Whereas in the past this kind of capability only made economic sense for relatively large operations, SaaS makes this optimization capability available to small operations as well. So we are replacing the economics of scale with the economics of scope.

As Mr WebService admits, there may be some resistance to changing business practices in times of trouble (speaking words of wisdom: "Let It Be"). The total cost of deploying this kind of service is not just the cost of the software, but also needs to include the time and effort to get all the bits of the business process to work efficiently and effectively together - process design, testing and management.

So this raises the question how easy is it to use this kind of service - not just calling it in isolation but building it into an idiot-proof business process. How straightforward are the interfaces, how does this route optimization plug together with driver scheduling and vehicle refuelling and all the other capabilities? Do the different service providers have a common protocol, so I can switch easily from using the PostcodeAnywhere service in the UK and the DNA Evolution service in Germany? If I have to ship goods from Newcastle to Neuschwanstein, or from Evenburg to Edinburgh, how do I mix the two services?

Mr Webservice is probably right to identify some potential business value here, but there may be some more work to do to make this a genuine proposition for small companies.

"And when the software's cloudy,There is still a web service for me.Optimize tomorrow, let it be."